Chapter 04 MC - CHAPTER FOUR Multiple Choice Questions 4-1....

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CHAPTER FOUR Multiple Choice Questions 4-1. The income statement: a. is a financial statement that shows the firm’s financial position at a particular point in time. b. is a financial statement that summarizes a firm’s revenues and expenses over a period of time. c. is a financial statement that summarizes a firm’s revenues and expenses at a particular point in time. d. details the firm’s assets and liabilities over a period of time. 4-2. All of the following items represent liabilities with the exception of: a. long-term debt b. notes payable c. prepaid expenses d. accrued expenses 4-3. Which of the following is a use of cash that would appear on the statement of cash flows? a. accumulated depreciation b. purchase of marketable securities c. receipt of interest payments d. decrease in accounts receivable 4-4. Common equity includes all of the following except: a. common stock b. preferred stock c. capital in excess of par d. retained earnings 31
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4-5. Given the following information, calculate earnings per share: Interest expense 40,000 Net income 400,000 Preferred dividends paid 65,000 Common dividends paid 100,000 Common stock outstanding 100,000 a. $1.95 b. $3.35 c. $2.35 d. $3.60 4-6. Which of the following is a source of cash that would appear on the statement of cash flows? a. increase in marketable securities b. decrease in notes payable c. increase in gross fixed assets d. increase in accrued expenses 4-7. According to accounting principles: a. current assets should equal current liabilities b. net working capital should equal zero c. operating expenses during the year are tied to revenues they helped to generate d. depreciation is a cash expense 4-8. Kerney’s EBT is $450,000. What is the marginal tax rate? Before-Tax Income (EBT) Tax Rate $0 - $50,000 15% $50,001 - $75,000 25% $75,001 - $100,000 34% $100,001 - $335,000 39% $335,001 - $10,000,000 34% $10,000,001 - $15,000,000 35% $15,000,001 - $18,333,333 38% Over $18,333,333 35% a. 15% b. 25% c. 34% d. 35% 4-9. Becker and Company had $150,000 in EBT. Using the schedule below, what was their effective tax rate? 32
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Before-Tax Income (EBT) Tax Rate $0 - $50,000 15% $50,001 - $75,000 25% $75,001 - $100,000 34% $100,001 - $335,000 39% $335,001 - $10,000,000 34% $10,000,001 - $15,000,000 35% $15,000,001 - $18,333,333 38% Over $18,333,333 35% a. 39% b. 28% c. equal to the marginal tax rate d. 25% 4-10.
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Chapter 04 MC - CHAPTER FOUR Multiple Choice Questions 4-1....

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